GIS In Relation to Crop Insurance

1. GIS In Relation to Crop Insurance Mark Coffman Spring 2011

2. Definition of Crop Insurance • A contract of indemnity by which one party promises to compensate another for the financial loss incurred by the destruction of agricultural products from the forces of nature, such as rain, hail, frost, or insect infestation.

3. History of Crop Insurance • In 1938, Congress passed the Federal Crop Insurance Act establishing the first Federal crop insurance program • Before this, private insurers had difficulty providing affordable insurance products to producers • The costs of the Federal Crop Insurance Act were high and participation was low

4. History of Crop Insurance • In 1980, Congress passed legislation that would lower costs and raise participation rates by forming partnerships between private insurers and the government • In May 2000, Congress passed legislation forming the Agricultural Risk Protection Act (ARPA) • This made it easier for producers to access different insurance policies

5. 2010 Oklahoma Indemnity Map

6. 2010 Oklahoma Crop Profile

7. Why Producers Use Crop Insurance • Excellent risk management for producers • Provides loan security for lenders • Provides a concrete source for bottom line protection

8. CRC and RA Insurance • Crop Revenue Coverage (CRC) • Revenue Assistance (RA) • Revenue insurance protecting against low yields, low prices, or combinations of these. • Indemnities are paid when actual gross revenue falls below a revenue guarantee

9. APH Crop Insurance • Actual Production History (APH) insurance is the longest running crop insurance • Cheapest form of crop insurance • Only covers producers from loss of bushels • Price fluctuations are not accounted for with APH insurance • The yield average is based on the history of that particular farm

10. APH Plans • Insurance • Farm Average: 40 bu • 75% coverage level • 40 * 75% = 30 bu/ac yield guarantee • Actual Yield • 15 bu/ac • 100 acres • $5.00 price election • 30 – 15 = 15 bu/ac • Indemnity payment • 15 bu/ac * 100 acres * $5/bu = $7,500

11. Losses • Fire • Insects (only if control practices were used) • Plant diseases • Wildlife • Earthquake • Volcanic eruption • Failure of irrigation • Revenue loss due to price • Prevented planting (due to insurable cause of loss)

12. GIS • GIS systems can creategeospatial snapshots of cropland • Land cover data layers provided by enhanced GIS systems help many people such as: • Crop insurance companies • Crop growers associations • Seed/fertilizer companies

13. GIS • The USDA and the RMA administer the Federal crop insurance program • GIS helps this program by providing maps and products which are then incorporated with crop insurance policy data

14. Prototype GIS • The original GIS tool was created by ArcGIS 8 • There are 4 main data layers that were used for analysis: • Soil Rating for Plant Growth • Slope • Elevation • Flooding Zones • The soil rating for plant growth is created by using nearly 25 parameters of soil quality in the Soil Survey Geographic Database. Some of these parameters include soil climate, depth of root zone, and fertility

15. GIS • GIS can help RMA with maps of participation rates, causes of loss, loss ratios, etc. • Map areas that are more likely to experience loss based on physical factors • Analyze crop conditions based on satellite sensing and predict crop failure/loss in advance